As new EU sanctions against Iran’s oil sector came into full force on Sunday,
the governor of the Islamic Republic’s central bank said his country had built
up $150 billion of foreign currency reserves to combat the effects of the
embargo.
Mahmoud Bahmani said that Iran had not sat idle in the face of
Western sanctions, but had implemented programs to counter the impact of what he
described as “spiteful policies,” according to Iran’s Mehr News Agency, which is
owned by the Islamic Ideology Dissemination Organization.
Bahmani did not
provide details about what Tehran’s plans may be but told Mehr that Iran’s oil
sales have been over $100b. in addition to between $40b. and $50b. of exports,
comprising a $150b. foreign reserve chest.
Meanwhile, Mehr listed
what it said were four main scenarios that Iran could employ to counter
sanctions. These included using foreign currencies other than the euro
and US dollar, closing the Strait of Hormuz, increasing oil stores and reducing
oil production from certain oil fields.
Also on Sunday, Iranian Petroleum
Minister Rostam Ghasemi said Iran was “fully prepared to deal with
sanctions.”
In a lengthy statement published on the Petroleum Ministry
website, Ghasemi said that “the government has planned and prepared for all
possible options in order to counter sanctions.”
He added that though
sanctions prevented oil exports to US and EU markets, Iranian crude is still
being sold on international markets.
The petroleum minister commented
that the world’s oil market “ought not to be political” because “the most
vulnerable citizens in oil-importing countries are suffering,” and added that
only “a few” countries had imposed sanctions on Iran, “due to [those countries’]
irrational demands.”
Noting that the US had allowed China and other
countries to be exempt from oil sanctions, Ghasemi added: “America knows that if
Iranian oil is removed completely from the market, prices increase.”
The
EU passed sanctions against Iran’s crude oil sector in January to punish the
Islamic Republic for its nuclear program. The sanctions prohibit the the
27-nation bloc’s members from importing Iranian crude oil and petrochemicals and
from insuring vessels transporting them. All contracts for importing Iranian oil
that were concluded before January 23 had to be terminated by
Sunday.
Last year, the EU accounted for almost a quarter of Iran’s oil
exports.
The White House praised the EU embargo on Sunday and said Tehran
had an opportunity in talks this week to make progress on international concerns
about its nuclear program.
“The United States welcomes the European
Union’s prohibition of all Iranian crude oil imports and other sanctions on
Iran’s oil industry, which go into full effect today,” White House spokesman Jay
Carney said in a statement.
“This collective decision of the 27 countries
of the European Union represents a substantial additional commitment on the part
of our European allies and partners to seek a peaceful resolution that addresses
the international community’s concerns about Iran’s nuclear program,” Carney
said, adding the EU move was an “essential part” of diplomatic efforts in
dealing with Iran.
“Iran has an opportunity to pursue substantive
negotiations, beginning with expert level talks this week in Istanbul, and must
take concrete steps toward a comprehensive resolution of the international
community’s concerns with Iran’s nuclear activities,” he said.
The US,
Israel and EU believe Iran is aiming to build nuclear weapons, while the Islamic
Republic claims its nuclear program is peaceful.
In three rounds of
negotiations, Western powers have demanded Tehran halt its highgrade uranium
enrichment activities, ship all high-grade uranium out of the country and close
down a key enrichment facility.
But the talks have lost steam. At
a meeting of political leaders in Moscow last month, there was not enough common
ground for negotiators to agree on whether to meet again.
Last Thursday,
the US enforced sanctions on countries carrying out oil transactions with Iran’s
Central Bank, although China and 19 other countries are exempted.
There
are signs that sanctions are causing significant damage to Iran’s energy
sector.
Last October, the US Treasury told the US Senate Banking
Committee that Iran faced a projected loss of $14b. per year in oil revenues
through 2016.
The Iranian rial has also plummeted while the country’s
official inflation rate skyrocketed over the past year to 21.5
percent.
In April, Iran’s parliament speaker Ali Larijani admitted that
Iranians were suffering from high youth unemployment.
On Sunday, with
sanctions set to bite even harder, Iran’s media voiced doubts on the
effectiveness of the oil ban.
Tabnak, the website of ex-Revolutionary
Guards Commander and Expediency Discernment Council secretary Mohsen Rezae, said
the sanctions were based on the “rational actor model,” according to which Iran
will abandon its nuclear program after the embargoes squeeze the Iranian middle
class, leading to civil unrest.
However, Tabnak said Iran believes the
West’s dependence on oil and petrochemicals will result in a “feedback loop”
that will ultimately force some Western countries to scale back the oil
embargo.
Iran’s ISNA news agency translated a lengthy article that
appeared on the OilPrice.com oil and energy news site on Friday, which argues
that oil sanctions against Iran have not worked because Tehran has implemented
tactics – including a barter deal with Pakistan to exchange wheat for oil – to
“give itself breathing room.”
Meanwhile, the Irdiplomacy website, which
is headed by Seyed Mohammad Sadegh Kharazi – Iran’s former ambassador to the UN
and France, who is close to reformist former prime minister Mohammad Khatami –
said oil sanctions cannot be effective since in the absence of sales to Europe,
Iran will sell oil to other countries.
Reuters contributed to this
report.